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[U] Melenyzer v. Tershel

Superior Court of Pennsylvania

March 11, 2014



Appeal from the Judgment Entered July 3, 2012, in the Court of Common Pleas of Washington County Civil Division at No. 99-5200




This appeal and cross-appeal arise from a complaint in equity filed by appellee/cross-appellant D. Keith Melenyzer ("Melenyzer"), seeking an accounting and dispersion of the assets of his law partnership with appellant/cross-appellee Paul A. Tershel ("Tershel"), following the dissolution of the partnership. Finding no error, we will affirm the judgment entered below.

During a prior interlocutory appeal from this case, a panel of this court accurately summarized the factual background:

In 1983, [Tershel] and [Melenyzer], along with Daniel Chunko, formed the law partnership of Melenyzer, Chunko & Tershel. On August 25, 1986, Chunko signed a contingent fee agreement on behalf of the partnership of Melenyzer, Chunko & Tershel with client, Kenneth Meek. Meek had been involved in a serious accident involving a defective automobile. On December 1, 1986, Chunko withdrew from the partnership. [Tershel] and [Melenyzer] formed a new partnership, Melenyzer & Tershel, on December 30, 1986. Meek's case became the property of the Melenyzer & Tershel partnership. According to the terms of the partnership agreement signed by Chunko, [Tershel] and [Melenyzer] secured complete possessory and ownership interest in all Melenyzer, Chunko & Tershel cases.
In the new partnership, fees were split equally between the two partners. The partnership shared a common fund into which proceeds from contingent fee cases were to be placed for distribution in accordance with the agreement.
In 1993, the Meek case went to trial. On February 11, 1993, the jury returned a verdict in favor of Meek for over seven million dollars. Meek was also awarded delay damages for a total award of nearly eleven million dollars. The partnership represented Meek on appeal to thls Court, and, on March 20, 1996, we affirmed the judgment. Meek v. Chrysler, 679 A.2d 264 (Pa.Super. 1996). In 1999, our Supreme Court denied allowance of appeal. Meek ex rel. Conte v. Chrysler Corp., 559 Pa. 377, 740 A.2d 1138 (1999). By this time, the judgment with interest had grown to over fifteen million dollars, the partnership being entitled to 50% as per their contingency agreement.
The current matter arose when both parties agreed to dissolve the partnership of Melenyzer & Tershel. In 1999, [Melenyzer] initiated action against [Tershel], as the parties disagreed regarding the terms by which dissolution should occur, specifically the date of dissolution and accounting among partners. [Melenyzer] asserts that the dissolution occurred on January 1, 1997 when each party formed a new law firm. [Melenyzer] submitted into evidence a letter written by [Tershel] dissolving Melenyzer & Tershel as of January 1, 1997. [Tershel] asserts dissolution occurred on December 31, 1995, and during 1996 the parties engaged in a winding up period.
On August 27, 2002, a bench trial began [before Judge David L. Gilmore] and continued for eight days. The trial court found, absent a contrary agreement, the Uniform Partnership Act (UPA) [footnote 2: 15 Pa.C.S.A. §§ 8301-8365.] applied and any income generated through the winding up of unfinished business be allocated to the partners based upon their interest in the partnership. The trial court found that dissolution occurred on January 1, 1997. The trial court also found all fees on any case originating before that date are assets of the partnership to be split equally between the parties. Additionally, the trial court found that all contingent fee cases originated before the date of dissolution shall be split equally, with appropriate credit for work performed after the date of dissolution at a rate to be determined by the court. Finally, the trial court found if the parties are unable to agree to the accounting of all fees, the court will appoint a Receiver to properly account.
On December 31, 2003, the trial court entered a decree nisi. [Tershel] filed a motion for post-trial relief which was dismissed as premature. On August 4, 2004, this Court granted [Tershel's] petition for review.

Melenyzer v. Tershel, No. 1364 WDA 2004, slip memorandum (August 5, 2005) at 1-4.

During that prior appeal Tershel presented a single issue:

Whether the Trial Court erred when it determined that the Pennsylvania Uniform Partnership Act mandates that all unresolved contingent fee cases originating during the term of a law-partnership are partnership assets, that the partner chosen by the client to handle contingent fee cases post-dissolution had a fiduciary obligation to his former partner to complete the cases, and that all fees received post-dissolution are partnership assets.

Id. at 4. This court held on appeal that the unresolved contingent fee cases originating during the term of the partnership were properly considered partnership assets and that any fees received post-dissolution were likewise partnership assets. The case was then remanded.

Unfortunately, during the appeal of the case, Judge Gilmore passed away. It was Judge Gilmore's intent that the case would be resolved in three phases. In the first phase, the court would determine the terms of the Melenyzer and Tershel partnership and the date of its dissolution. This was essentially the phase that had been completed on December 31, 2003 with the entry of the initial decree following a trial on those issues. In the second phase, the court would resolve Tershel's affirmative defenses and counterclaims to Melenyzer's complaint in equity. Finally, in the third phase, the court would perform a valuation of the assets to be divided and then direct payment.

When the case was remanded, it was assigned to Judge Katherine B. Emery for trial on Tershel's affirmative defenses and counterclaims as well as valuation. Tershel moved for a trial de novo on all issues, including the terms of the partnership and its date of dissolution. On October 30, 2006, Judge Emery denied the motion and filed an opinion. Therein, Judge Emery analyzed the cases relied on by Tershel and determined that they were inapposite. Judge Emery ruled that under the doctrine of law of the case and the coordinate jurisdiction rule, she was bound by Judge Gilmore's findings that the date of dissolution was January 1, 1997, and that any fee cases originating before that date belonged to the law firm and were to be split equally between Melenyzer and Tershel.

Thereafter, hearings were held pertaining to Tershel's various affirmative defenses and counterclaims. On October 31, 2008, Judge Emery entered a second order and opinion. Therein, she found merit to some of Tershel's claims, including that Melenyzer failed to disclose fees generated in partnership cases, failed to deposit funds, diverted funds to himself, failed to pay certain rent, and that Melenyzer failed to use his best efforts in generating income and performing work for the partnership from 1990 to 1995. Ultimately, the court determined that Tershel was entitled by these losses to offsets against Melenyzer's share of the Meek proceeds. Following valuation proceedings, on February 17, 2012, the court divided the Meek escrow account, [1] ...

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